1. The Independent Commission for the Remuneration of Public Office Bearers (Commission) is statutorily obliged by virtue of section 8 (4) and (5) of the Independent Commission for the Remuneration of Public Office Bearers Act, 1997, to make annual recommendations relating to the salaries, benefits and allowances, and the resources required by public office bearers to enable them to perform their respective duties effectively.
2. On 27 February 2009 the Commission met and resolved to recommend the 2009/2010 annual remuneration for public office bearers. The Commission considered, amongst others, the following factors to be relevant which forms the basis for its recommendations:
3. A link between labour costs and inflation was regarded as a sound basis for making remuneration adjustments.
4. The Commission considered the relevant annual and month-on-month CPIX figures, as well as the percentage remuneration increases for executives, mid-management and Public Office Bearers for each year since 2005.
5. The most recent central forecast of inflation by the Reserve Bank indicated that the inflation declined at average of 7.5% in the first quarter of 2009, and further declined to below the upper end of the inflation target range during the third quarter of the year by an average 5.2%. The inflation is then forecast to increase again and to breach the upper end of the target range in the first quarter of 2010. The month-on-month CPIX for April 2008 was 10.4% and for April 2009 was 8.4%.
6. The Commission acknowledges the fact that South Africa like other countries is experiencing the effects of the global economic downturn. Slowing revenue growth, contracted GDP by 6.4% and 3.3% in first quarter and second quarter of 2009 respectively. Revenue collections are expected to decline by approximately R 70 billion in the 2009/10 fiscal year. However, economists predict that the upturn in the economy should reach South Africa by the 4th quarter of 2009.
7. The Reuters consensus survey conducted in December indicates that analysts expect inflation to average 6.4% in 2009 and 5.8% in 2010, and the trend of wage settlements still poses an upside risk to the inflation outlook.
8. According to Andrew Levy Employment Publications, the average level of wage settlements amounted to 9.4% in the first nine months of 2009 compared with 9.6% in the corresponding period of 2008. These increases are consistent with the Quarterly Employment Survey (QES) of Statistics South Africa, which reported that growth in average nominal remuneration per worker in the formal non-agricultural sector of the economy moderated from 11.5% in the first quarter of 2009 to 8.7% in the second quarter. Unit labour cost increases declined from 11.3% in the first quarter to 9.3% in the second quarter.
9. In 2008/2009 the public office bearers' remuneration packages were increased by 11%. In light of the Senior Management Service's increase, world economic difficulties and the decreasing CPIX, it would be justifiable for the Commission to consider the economic realities that the country is facing in determining 2009/2010 remuneration for public office bearers.
10. It is imperative for the Commission to maintain independence from the public service salary negotiations and other potential distractions in making its recommendations.
11. The Commission duly consulted, as it is statutorily mandated to do, with the Ministers of Finance and of Justice and Constitutional Development, as well as with the Chief Justice of South Africa, before compiling its annual recommendations.
12. The Commission further made courtesy consultations with the Minister of Public Service and Administration and the Minister of Cooperative Governance and Traditional Affairs and received support from both Ministers for the Commission's proposal.
13. The Commission considered the responses received from the relevant Ministers and the Chief Justice in terms of the consultations conducted. All responses received supported the Commission's proposal of 8% cost of living adjustment except for the response received by the Minister of Finance.
14. The Commission considered the views expressed in the response by the Minister of Finance and resolved that the issues raised were previously considered and debated by the Commission.
15. In view of the above the Commission attaches schedules 1, 2, 3, 4, 5, 6 and 7 which reflect the general percentile increase of total recommended remuneration packages of 8% per annum for all Public Office Bearers effective from 1 April 2009.
16. The recommended total remuneration reflected in schedules 1, 2, and 3 include the following elements:
16.1 A basic salary component equal to 60% of the total package, which constitutes the pensionable salary;
16.2 An amount of R 120 000 per annum determined as the amount to which section 8 (1)(d) of the Income Tax Act, 1962, applies. This amount is included in the basic salary component;
16.3 An employer's pension benefit contribution equal to 22.5% of pensionable salary. The remaining 32% of the recommended employer pension benefit contribution will not form part of the total remuneration package. The state will be liable to inject the cash on an annual basis into the pension fund (item 16.3 is not applicable to the position of the President); and
16.4 A flexible portion of the remaining amount of the total remuneration.
17. The recommended total remuneration reflected in schedule 4 includes the following elements:
17.1 A basic salary component equal to 60% of the total package, which constitutes the pensionable salary.
17.2 An amount of R 120 000 per annum determined as the amount to which section 8 (1)(d) of the Income Tax Act, 1962, applies. This amount is included in the basic salary component.
17.3 A flexible portion of the remaining amount of the total remuneration.
18. The recommended total remuneration reflected in schedule 5 includes the following elements:
18.1 A cash annual salary component representing 72.24%; and
18.2 A non-cash component of 27.76% (which includes motor allowance and employer medical aid contribution).
18.3 The total remuneration structure does not include pension benefits which are separately regulated by the Judges' Remuneration and Conditions of Employment Act, 2001.
19. The recommended total remuneration reflected in schedule 6 includes the following elements:
19.1 A basic salary component equal to 60% of the total package, which constitutes the pensionable salary;
19.2 An employee's pension benefit contribution to the applicable pension fund; and
19.3 A flexible portion of the remaining amount of the total package.
20. In addition to the recommended total remuneration reflected in schedule 7 the following benefits are recommended to the Traditional Leaders:
20.1 Pension benefits
Traditional Leaders who are full time members of the National House and Provincial House of Traditional Leaders be allowed to join the Political Office Bearers Pension Fund.
20.2 Risk Benefits
Traditional Leaders who are not full time members of the National House and Provincial House of Traditional Leaders who are currently receiving a basic salary are offered additional monthly benefits as follows:
A Death Benefit with Government contribution of 5% on member monthly premium, and
A Funeral Benefit with Government contribution of 5% on member monthly premium.
21. A Government Notice setting out detail recommendations will be published in the Government Gazette today, 12 November 2009.
Enquiries: Peter Makapan 082 802 3539
